I've just been using the windows dv capture encoder program, which doesn't deinterlace the hdv footage afaik.

So I installed the sony vegas pro trial, but it doesn't recognize my camera for some reason. Still, I found the deinterlace option in project properties or whichever dialogue box it was, so now I can open up the .wmv files that get saved on my computer in vegas pro, and I think it deinterlaces them when I re-render them (as wmv's), but I don't exactly know.

I skimmed the wikipedia page about the wmv9 codec, but I'm still at a loss to understand if A.) The wmv files are being deinterlaced after being imported, and not captured, in vegas pro, and B.) if the windows vista encoder-captured .wmv files are the highest calibre for editing and uploading.

Youtube maxes out the resolution of my vids at 480p, which, I don't know, is because I have a free account, or because I need a better dv-capture program.

B.) if the windows vista encoder-captured .wmv files are the highest calibre for editing and uploading.

Windows Media Video (*.wmv) is a horrid file format for editing.

You may want to consider something like the inexpensive Adobe Premiere Elements. You will find a lot more options for capturing and editing will be vastly easier with much higher quality results. You can even output directly to HD formats for YouTube.

YouTube does not magically bump up your footage to HD -- you have to upload HD.

The ideal size and codec is, as YouTube recommends, 720p H.264 (though I recommend the open source x264 codec, as I think it leads to better results). By uploading the HD version, all of the smaller versions will automatically be created by YouTube.

But for the love of all that is holy, stay away from WMV format -- it's evil, I tell you. EVIL!